Survey: More than Two-Thirds of Plan Sponsors with DB Plans for New Hires Will Keep Them

“Several factors including low interest rates, falling equity values, a deep economic recession with uneven recovery, and regulatory and legislative uncertainty have made sponsoring DB plans less attractive to employers over the past decade,” says Alan Glickstein, a senior retirement consultant at Towers Watson. “Yet, despite a vastly changed landscape for retirement plans, the fact that many employers remain committed to DB plans is encouraging, especially since it is more difficult for employees to rely on a DC plan as an effective stand-alone retirement plan.”

When asked why they are committed to offering a DB plan to new hires, more than seven in 10 (71%) respondents cited promoting employee attraction and retention as the key reason, followed by maintaining employee morale, cited by 50% of respondents. The survey noted that only one-fourth of respondents with active DB plans are not firmly committed to their DB plan, and a small percentage (7%) plan to close or freeze their plan over the next two to three years.

The survey also found that employers — recognizing the need to help employees save for and feel more secure about retirement — are adding features to their DC plans that mirror features of DB plans. For example, nearly six in 10 (59%) respondents use automatic enrollment, and about half of those have implemented automatic escalation, which typically increases the employee contribution annually.

Additionally, while virtually all employers offer at least a matching contribution to DC plan participants, more employers (42% now versus 33% in 2007) are providing non-matching contributions.